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On the role of budgeting in the delegated provision of public goods under asymmetric information

  • Krause, Günter
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    The present paper investigates the neglected topic of budgeting rules for public bureaucracies performing governmental activities within predetermined budgets under rules governing expenditure levels and composition. We analyze the optimal budgeting scheme, if the bureaucracy has superior information vis – vis the policymaker. It is tasked with supplying different types of public goods and is subject to costly audits. The optimal budgeting scheme for the bureaucracy is determined. It is shown that it crucially depends on the level of auditing costs. The same holds for the extent of discretion given to the bureaucracy about levels and composition of public expenditures.

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    Paper provided by University of Würzburg, Chair for Monetary Policy and International Economics in its series W.E.P. - Würzburg Economic Papers with number 51.

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    Date of creation: 2004
    Date of revision:
    Handle: RePEc:zbw:wuewep:51
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    1. Tirole, J., 1993. "The Internal Organization of Government," Working papers 93-11, Massachusetts Institute of Technology (MIT), Department of Economics.
    2. Milton Harris & Artur Raviv, . "Capital Budgeting and Delegation," CRSP working papers 343, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
    3. Amrita Dhillon & Carlo Perroni & Kimberley Scharf, 1997. "Implementing tax co-ordination," IFS Working Papers W97/12, Institute for Fiscal Studies.
    4. Roger H. Gordon & John D. Wilson, 1999. "Tax Structure and Government Behavior: Implications for Tax Policy," NBER Working Papers 7244, National Bureau of Economic Research, Inc.
    5. Cremer, Helmuth & Gahvari, Firouz, 2000. "Tax evasion, fiscal competition and economic integration," European Economic Review, Elsevier, vol. 44(9), pages 1633-1657, October.
    6. Groves, Theodore & Ledyard, John O, 1977. "Optimal Allocation of Public Goods: A Solution to the "Free Rider" Problem," Econometrica, Econometric Society, vol. 45(4), pages 783-809, May.
    7. Roger H. Gordon & John D. Wilson, 2001. "Expenditure Competition," NBER Working Papers 8189, National Bureau of Economic Research, Inc.
    8. Besley, Timothy & Jewitt, Ian, 1991. "Decentralizing Public Good Supply," Econometrica, Econometric Society, vol. 59(6), pages 1769-78, November.
    9. Dewatripont, Mathias & Jewitt, Ian & Tirole, Jean, 1999. "The Economics of Career Concerns, Part II: Application to Missions and Accountability of Government Agencies," Review of Economic Studies, Wiley Blackwell, vol. 66(1), pages 199-217, January.
    10. repec:cup:cbooks:9780521894753 is not listed on IDEAS
    11. Gary S. Becker & George J. Stigler, 1974. "Law Enforcement, Malfeasance, and Compensation of Enforcers," The Journal of Legal Studies, University of Chicago Press, vol. 3(1), pages 1-18, January.
    12. Boadway, Robin & Horiba, Isao & Jha, Raghbendra, 1999. " The Provision of Public Services by Government Funded Decentralized Agencies," Public Choice, Springer, vol. 100(3-4), pages 157-84, September.
    13. Boadway, Robin & Marceau, Nicolas & Sato, Motohiro, 1999. "Agency and the design of welfare systems," Journal of Public Economics, Elsevier, vol. 73(1), pages 1-30, July.
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